The 5 Steps to Getting Your Small Business Loan
Small business loans are long-term investments in the growth of your company, so it takes some planning and hard work to get ready to qualify. It helps to break the process down to steps you can focus on, and there are five steps that you can take to get to your loan. SBA loans are based on a few factors, including your company’s ability to have a positive impact on your community and your financial health.
Before you contact any loan providers or start putting together an application, the first step is to build your company’s credit scores. Business credit scores are separate from personal credit scores, and there’s a chance your lender will review both. The business credit score will be a major factor in your loan determination, but the personal score will help the bank make sure your personal finances are not suffering to stabilize your business. This is an important consideration as they calculate risk. If you need to raise your scores, focus on paying down debt and tightening your cash flow so you pay vendors out more quickly. If you need to establish credit to get SBA loans, opening a credit card or credit line for your business is a great way to do that.
The second step is to understand your lender’s requirements for applications. Each lender will be different, and if you’re going to apply simultaneously with a few loan providers, you’ll need to keep your research straight. After that, step three is when you pull together all your company’s financial data and business records and organize it for presentation. That way, you’re ready to move on to the crucial fourth step—writing your business plan.
A good business plan will discuss your company’s staff, marketing plans, current sales volume, and strategies for growth in a way that establishes how the loan will be used to accomplish that goal. Whether it’s through the purchase of facilities that allow you to invest in an asset and stop paying rent, equipment financing so you can do more work more efficiently, or the loan that lets you buy an existing company, you need a business plan that shows how SBA loans fit your vision for your business.
Last of all, you will need some collateral. In the case of loans for equipment and property, it’s easy to find that collateral because you can use the purchase itself. For acquisition loans, you may need to secure them with a personal asset or with one of the business’s existing assets.